Is it foolish to start a company in a crowded market when the economy is going south?
In 2008, when the great recession just started Scott Lerner launched the company that makes Solixir– which makes all natural, functional beverages with the names Awaken, Relax, Think and Restore. I invited him here to talk about what happened when he launched his business.
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Hey there freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. Is it foolish to start a company in a crowded market when the economy is going south? In 2008 when the great recession just started Scott Lerner launched the company that makes Solixir which makes all natural, functional beverages with names Awaken, Relax, Think and Restore. I invited him here to talk about what happened when he launched a business. Scott, welcome.
Scott: Thank you. Appreciate it.
Andrew: When we talked before I started this interview you told me about the ‘oh crap’ moment that happened sometime around September of 2008. you I was trying to remember exactly what you said but maybe you can share it with the audience.
Scott: Sure. I had recently left my I was working on new products for the Naked Juice brand and left to start Solixir and about a week into the start of my creation that’s really when the stock market took a nose dive and all hell broke loose. I was in a situation where I had to keep going; it’s not like I could go back to my previous employer and say, ‘Hey, take me back.’ That was my ‘oh, crap’ moment and now I just had to fight to make it happen.
Andrew: How deep in were you at that point?
Scott: I had raised some money already and we had started the product development and the packaging. There was really no turning back and I really truthfully never had any inkling in my head to do that. It was just forge ahead. Didn’t really see the recession as an issue per se. I knew it was going to be challenging as related to raising money, more so than anything else, but actually from a positive perspective dealing with retailers, because there were less people maybe jumping to start their own things as well as the bigger companies were pulling back, it did give us some opportunities to get shelf space. For example, when we launched we launched nationally with Whole Foods Market which was quite unheard of for a start up of our size. Basically from scratch. I do believe there were some positives to it as well but the hardest challenge, the biggest challenge was on the raising money front. I knew people were going to be very cautious with their money so that was probably the biggest challenge to overcome when the recession hit.
Andrew: I want to dive in and understand how you got such a big client so soon. How you were able to raise money at a time when investors were afraid. How you were able to actually launch a business and why you launched a business in the beverage market because there are tons of competitors. It’s not like the IOS market or even the Android market when they were at that point. We’re talking about a mature business.
Andrew: Let me understand you for a bit.
Andrew: I read, I think it was in the Chicago Tribune, three years ago, you said that you were an entrepreneur from the start. That you felt like you were a born entrepreneur. And here you were working at Pepsico. Why would and entrepreneur go to work at a big company like Pepsico?
Scott: My background, I would say, I’m a very linear thinker. After I graduated from the University of Maryland, I joined the Marine Corps. And I was an officer in the Marine Corps for five years, and that created even more structure in my life. And I’ve always believed that in order to be successful you need to be prepared. After I got out of the Marine Corps and got my MBA, I knew I wanted to go work for a large consumer packaged goods companies like a Pepsico to get the training.
At some point, I didn’t know when, but I knew I was going to jump and do my own thing. And it was just sort of the right time, right place situation for me when I started Solixir. But that was really the case. Like I never saw myself rising through the ranks to CEO in a big CPG company. Not that I couldn’t do it. It’s just I wanted to go experience how you did something from the ground up.
I’m a super competitive person as well and this type of venture allows me to sort of express that. So that would also relate back to why I chose this category. I evaluated a bunch of different categories and it’s kind of like I wanted to go play with the big boys, and I thought I could win. And we are doing just that.
Andrew: Before we get into Solixir, let me ask you about this. You said that you wanted to be prepared. I’m looking at my day here today and a guest had to drop out and couldn’t do an interview about two hours ago, which gave me and extra hour of free times. I thought, all right, great, I’ll return some boxes that I have to Amazon.
And I said, ‘Well, let me go get a soda first. I could use a little bit of energy because I didn’t get much sleep last night. So I went and got a soda. Then I said, ‘Hey, you know, I should really check to see how my post from this morning is doing on Hacker News, because it was top six last I saw it this morning. So I went and I saw that. Basically there was a lot of distraction in that hour before all the packages were mailed out properly. As a kid I used to dream of being in the military, just so I could get the discpline that would beat that out of me.
Andrew: Do you, as a guy who spent time in the military, do you procrastinate like this? Do you have mornings like that?
Scott: No, I don’t, really. You can ask anyone who works for my company. I’m super organized to the point of I truly practice the philosophy of only touch a piece of paper once. I keep no emails in my inbox. I have no sort of things just floating around. I’m very detailed in how I attack my day, my week, my month. And it all revolves back, from a planning perspective, as how we each year, have an annual plan, just as we would have had in corporate America. Then we break that up and compartmentalize it into 90 windows, and then 30 day window. Then, quite frankly, weekly windows.
Andrew: Give me more specifics on personal level. What you said earlier about not touching a document twice makes sense. You get an envelope in the mail, you look at it. The temptation is to say, ‘Oh, it’s too hard to handle right now, I’ll put it aside because I’ve got something more pressing.
Andrew: And then you move onto something else. And then when you come back to it you have to catch up on what you read the first time and it becomes a big ‘to do’ pile that starts to accumulate. I understand how you don’t do that. Talk to me about other specific ways that you are more productive than most people.
Scott: I’m a multi-tasker. As an example, my Outlook is open all day long, and as I’m working on something and emails are coming in I act on them immediately. I either delete them, delegate them to someone else. Rarely do I save them. But I will jump from, if I’m working on an investor presentation and an email comes in, I tackle it right on the spot and then I jump back to what I’m doing.
Andrew: So the ‘never touch a document twice’ doesn’t apply to email, or to the work that you do when an email comes in?
Scott: True. True. I guess I just see it as a fluid event that I knock things out so that I don’t procrastinate and work on something for ten minutes and then come back in three hours. It’s kind of just ticking off my list. I truly do use the tools in Outlook, as far as my tasks and notes and things like that. I keep track of that with my calendar. I provide myself with reminders all the time. Just because there’s so much information coming in, and I do wear multiple hats in this role, in the start up, and so I don’t ever second guess or believe that my mind is going to capture everything, so, you know, rather than writing down on a piece of paper, I truly do use Outlook which syncs up with my iPhone, and that’s how I do it. We strive to be somewhat of a paperless office and have everything done electronically and house it, whether it be on the server or whatever it might be. So, you know, we try to use technology to our advantage, you know, if I do find an app or something out there that can make me even more efficient, you know, I’ll do that. It’s striving to kind of eliminate the noise, so that I can think and direct, and it’s really been helpful for me, because I do see where you could get bogged down with a lot of the details and not really focus on the big picture, so that’s how I operate on a daily basis. Even personally from a lifestyle perspective, I work out everyday, in the morning, you know when I get up, I go to the gym and then I come to work, so there’s no excuses later in the day and that really helps to clear my mind too, when I hit the office and I just start running from there. So those are some of the things I kind of incorporate into my life.
Andrew: Okay, so, you’ve gotten yourself all prepared and it was time to start a business. How did you decide to get into the beverage business and why specifically the functional beverage business?
Scott: So, when I was working for Pepsi and they had purchased the brand Naked Juice, I really wanted to go work on that business because for one, it would allow me to play around in a little bit more of an entrepreneurial environment but still getting my corporate paycheck, which was a real plus. So, I wanted to do that and I hadn’t really had much experience in the beverage space, before that I was doing a lot of snack foods and what-not. So, really as I started to play around in that space I really liked it. It was exciting, because it was so competitive, and…
Andrew: What was so exciting about it? Do you have a specific?
Scott: …just in general, that there was at least one, to two, to three brands that you would match up everyday and go head-to-head with, like when we were at Naked, Odwalla[SP], which was a Coke brand that was our competitor everyday, and we had to beat them everyday.
Andrew: How do you compete with them everyday? What can you do?
Scott: Down to the store level, promotions, shelf-space, advertising… You name it.
Andrew: Now, if you’re in headquarters, you’re obviously not the person who’s talking to the store….
Andrew: But you are determining whether the store is promoting you, or promoting a competitor, giving more shelf-space to you, which means that more people are more likely to grab your drink, or to your competitors. What do you do to get the guy who is in the store to push your stuff, to give you more space?
Scott: I mean, when you’re in the Pepsi Co. environment, because there are so many layers, and you know I was quite frankly at more that 30,000 foot level, it was making sure you were linked up with the sales floors, so that they could execute programs and they had the necessary budget to do that. So it’s very different than my life now, where in many instances I might personally be in a store, you know, negotiating a deal to get on shelf. So, that’s another element that I kind of, took a lot of the good stuff from corporate America and sort of, sprinkled it on…. I always tell people we’re a corporate ready product in an entrepreneurial package. That’s the way I fashion the product and the brand, as well as the company. The way we do things is very structured, but yet we’re still nimble, fast, and get things done. So, you know, I think that they’re going back to the original question of beverages. It’s a very competitive and scalable opportunity, and also I knew from being at corporate there were a lot of emine[SP] and exit opportunities at the end of the game, where as if I did things right, knock on wood, Coke, Pepsi, whoever it might be, they’d come calling in five, ten years, whatever it took, and then I can kind of get that payday, because let’s be honest, I love what I’m doing and it’s very rewarding for me, but anyone that’s been an entrepreneur has had to suck it up as far as salary cuts and things like that. You know, I went from a very well paying job to…
Andrew: How much?
Scott: Well, in the six figures, to making…
Andrew: Are we talking 150?
Scott: What’s that?
Scott: Yeah, around that range, to making zero my first year and then incrementally increasing from there, and haven’t even approached that range four years later. So, there is that element of what you’re putting in from a sweat equity perspective, is it going to pay off in the end? I knew there would be that opportunity within this space because of the ability to scale so quickly, because, let’s be honest, everybody drinks. Ready to drink. . .
Andrew: Yeah, everyone drinks. So, let’s talk about how you decided to get into this space, because what I see is, “Boy, there are two giants already in this space, Coke and Pepsi.” Am I right, or am I. . .
Scott: I mean, there’s more than that. I mean, there’s Red Bull, there’s Monster, there’s Five Hour Energy. There’s a whole bunch of different companies out there.
Andrew: And they’re already there. I mean, it’s not like the early days when Red Bull was just introduced to the U.S. market and people weren’t sure about this energy drink, and maybe they were looking for. . . People already have their favorites.
Andrew: That’s what I see. I go, “Whoa, I’m not getting in there.” What do you see that made you say, “I’ve got to get in there?”
Scott: Right. Well, it’s based on the fact that everything was utilizing the synthetic ingredients, basically. There wasn’t really an all- natural proposition, and there wasn’t a proposition that I thought was nutritionally sound, as far as the sugar level, and whatnot. Everyone was using sweeteners and artificial sweeteners. We use just fruit juice as the sweetener in our products, so we’re not bringing a new benefit to the market. I mean, we have an energy drink. We have a relaxation drink, a mental clarity and immunity drink, but we’re just doing it differently as it relates to, specifically, the product. We use no sugar added, we have no sugar added. We use no sweeteners. I knew as the whole foods sort of population grew, that would be a big trend and it would start to translate into the mainstream over time.
Andrew: I see. You were saying, “Yes, there are energy drinks out there, but there are people who believe in whole foods and eating healthier, and they’re going to want energy drinks, too.”
Scott: Yeah, and if you walked into a Whole Foods or a health food store, for one, you wouldn’t have Red Bull in there. You wouldn’t have Monster. Coke and Pepsi don’t live in there. There was really not that many options within, specifically, Whole Foods, which, again, I think is why we got that national launch. But then, over time you saw the mainstream grocery stores, the 7-11s, starting to. . . People are demanding different options now. That’s kind of like where we’re coming into. We can come back to this, but recently, over the last five to six months, we pivoted as a company. The way we rebranded allows us to go more into the mainstream where before we were very well rooted in the natural channel, or the Whole Foods business, basically.
Andrew: All right. Added that to the list. The list includes the pivot. I want to ask you about your revenue. I know you’re not going to share everything, but I’m going to see what we can get, and, of course, your Facebook page, which I want to tell people about, which is Facebook.com/solixir. I know you’re trying to grow your likes, and if everyone who’s watching us goes and likes that Facebook page, we can start seeing even more growth for you on social media.
Andrew: All right. So you come up with this idea. It’s time to get started. What’s the first thing that you do?
Scott: Believe it or not, the first thing that I did was I spent a good bit of time on the P and L, the profit and loss statement, because I knew if I couldn’t figure out a way for this to make money, it wasn’t worth it. My wife would always. . . She would come in the room and I would be throwing some stuff around, or throwing some expletives around, and she’s like, “What’s wrong?” I’d say, “I can’t get these numbers to work.” She’s like, “Why are you worrying about that? This is a great idea. People are going to love it.” I just said, “Hey, if it can’t make money then why do it?” So literally for a good month, I’d say, I was inputting the different costs associated with the business, how much we’d have to spend from a marketing perspective, even before I, quite frankly, came up with the name. I had some names I was throwing around, but it was really, again going back to the corporate mindset of structure, knowing that what we execute we can make money with.
That was the first step, to really develop the P and L, know that I could hit a price point that I wanted to in the market place. Then, the next step was to start to develop the brand and the product, and I treat those separately. The brand was really related to the name, what the package was going to look like. The product is obviously the stuff inside of it. We worked with, for the product, a product development firm to help us put the idea together. Again, one of the advantages I had, coming from the world of Pepsi and some of even my past experiences, I had a good network built up. A lot of things I knew who to call, and I totally played the poor card and the entrepreneurial card and kind of like, ‘Hey can you help me out?’ or ‘What can you do for me?’ And for the most part a lot of people did that for me because they knew I wasn’t going to waste their time. If I was going to do something, just me personally, I was going to get it done and make it happen and so there were a few people that took a chance on me.
Andrew: Let me take it a little slower because I do want to know about the calls you made and how you got into stores. But first let me understand this part of the process. You sat down with a spreadsheet and you said if we have all these expenses how many cases do I need to move to make this whole thing work? What were some of the big expenses that you had to cover with your income?
Scott: For one, just making the product. Where we were going to produce it, the ingredients that were going into it. In addition to that, what we were going to have to spend from a trade promotion allowance which is when you go in a store and you see a product on sale someone’s footing the bill for that and that usually is going to come back on the manufacturer. That’s an element. The marketing cost. Even little stuff like postage because we had to send samples out. All those little things that add up. I would tell you, looking back now, I probably had roughly 60% of the true numbers in there and there were just other things I didn’t know like I thought when we started the company I would have to do two in-stores demonstrations per store per Whole Foods which was like 200 plus stores and I’d be golden. I’ve probably done at least ten times that if not more. The realities of starting a brand from scratch it is extremely difficult and challenging because you have to drive awareness. I made some, not costly mistakes in my assumptions, but I just didn’t know at the time.
Andrew: Then does it make sense then to spend so much time putting a spreadsheet together if 40% of it is not going to be right anyway?
Scott: That’s a good argument. I guess in the end the one requirement was that we had to figure out a pricing structure to know what we could charge for the product in the market. I had to go to the retailer and say, ‘I want this to be $1.99′. And if I didn’t have any numbers to base that on that’s really where I could run into trouble. Even if I was 30% off if I had come into market at $1.59 and realized later I was way off I probably wouldn’t be talking to you right now.
Andrew: You can’t go back to the retailer and say, ‘You just introduced this as a $1.59 product but really it should be…’
Scott: You’d get hammered. But dovetailing off what you just said there because I think it’s a valid statement is what I didn’t have truthfully was a marketing plan because for one, my budget wasn’t huge and two, I didn’t really know how I wanted to market this thing until I got actually in the market. In the first year or so we didn’t really have the structured annual plan and the marketing plan like we have now because we had no history. There was a little shooting from the hip but that’s really where I didn’t focus my efforts as far as trying to get really detailed because Murphy’s Law came into play the minute we stepped into a store.
Andrew: Everything that can go wrong will go wrong. Let me understand this. I don’t want to put it down by saying what’s the point of doing an income statement or creating your projections if they’re 40% off. You just made a really good case for why it made sense for you to do it. It seems like there are two other things that I noticed there. The first is that even if you were wrong about how many in store demonstrations you needed to give the fact that you knew you needed to do them was important and that came from putting together a list of all your expenses. The fact that you knew how doing five times or ten times as many in store demonstrations would impact your income statement and your profit that is true because you actually sat down and did your income statement. Just makes you more aware is what I noticed.
Scott: I would agree. The other thing we haven’t touched on really yet is on the money raising side because I was organized and had the ability to present this information to potential investors that got me meetings and ultimately got me checks whereas if I just came in and didn’t even have a clue as to what the numbers would be I can guarantee I wasn’t going to raise any money. Maybe my dad would have given me some money but beyond that probably not much. Being organized and having that plan, albeit it being off later, because my revenue projections were bad. I was already supposed to be sold by now per the projections, which isn’t the case at all, but there is some gamesmanship. Anyone who has raised money, there is gamesmanship involved, and if you go in there and say you’re going to do $1000 in revenue your first year, people are going to laugh at you. Go open a lemonade stand or something.
Andrew: The other thing I noticed was that you were probably able to put together a more detailed income statement because you were in the business, because you worked for PepsiCo. You understood what the different elements were. By the way, before I move on to the next question, can you hold up that can so that people can see it? I’m sure people are familiar with it from being in stores.
Scott: This is our newest formula. It’s called Think. This one is for mental clarity.
Andrew: So if I drink that, I can think a little bit more clearly.
Scott: Exactly, you might even be wealthier if you drink it.
Andrew: What about that actually, the promises that come with a drink like that. We laugh at it, and I saw that on Twitter you have this joke you post of three guys laying on the floor tired, and the Tweet says something like, “If you drink our energy drink you won’t have a day like this,” or, “If you’re having a day like this, drink our energy drink and it’ll wake you up.” We are making promises with these drinks, right?’
Scott: Yes, to some extent, and I think the balance of what we use is that we work within the guidelines of the FDA and the FDC and we don’t violate those. You’ll never see what’s called a structure function claim. We never say, “This is going to cure cancer” or, “This will keep you awake.” It’s more suggestive in a way. With our product, we do let the ingredients speak for themselves in the fact that you can pronounce all of the ingredients in our product. They’re all plant-based. Also, there’s an efficacious amount of the ingredients in there. There’s over 1.4 grams of the actual herbs in there (the botanicals), so we don’t subscribe to what I call berry-dusting, whereas there are some companies out there who put less than a penny’s worth of vitamin in a product, and it’s no better for you than a can of soda. That’s not what we do and you can research all our ingredients and see where they link back to the promises. So, we’re very careful not to overstep our bounds. You may see some posts that are suggestive in nature, but we do know these products work. Since we’re a small company, we haven’t had the ability to do clinical trials and what not to prove it per se, but we have enough feedback from consumers that it is working for them. That’s the formula we push; it’s function first, labor second. This is not a soda substitute.
Andrew: What about this? On a site called Chow.com, I’m looking at an article from January 3, 2011, “You’re Not Allergic to MSG and Six More Culinary Secrets.” It’s with Chef Wendy who works with a Canadian firm who develops private label products for companies like Wholefoods. What’s she saying basically is that you can take an orange and mess with the chemical structure of it so much that it can become whatever you want. And orange juice that is 100% oranges is basically full of chemicals; the chemicals just happen to be coming from oranges, so you can say it’s 100% oranges and give it whatever flavor structure you want, whatever sweetness you want, whatever deep shade of orange that you want for your client. So the question is, ingredients really aren’t that significant. It’s what happens with them, right?
Scott: Yes and no. You can manipulate natural ingredients to do what you want to them. But I guess it’s really, are you taking them in their somewhat purest form and combining them in a way that they’re going to be effective? And that’s really what we do. I never tell people we’re running out in the backyard and picking out chamomile or yerga mate or whatever it might be, but we buy all our ingredients from the world’s best suppliers. I can go buy my botanicals directly from suppliers in China, but I wouldn’t know where it’s coming from. There would be no testing, no safety involved, so we don’t do that. We pay more money for a sort of third-party organization that prepares the ingredients for us. So we’re very cognizant of that, very cognizant of not bearing things and ingredient list because there’s actually an argument around the [??] corn syrup. There’s a lot of companies that will bury a slight trace amount of that in artificial flavors or natural flavors and not disclose it.
Another example would be like we don’t use what’s called acidulants. There’s no citric acid or scorbic acid in our products that a lot of companies pass through to you as Vitamin C but they’re really utilizing it as preservative. Now, is that bad? I’m not going to sit here and say that is but we don’t use it. It’s just basically three ingredients. It’s water, juice and the botanicals.
So yes, you can play the game and my beef with the industry that I’m in, is it really a self regulated industry? I mean, the food industry in general is just self regulated. Yet, there’s a governing body which is the FDA but they’re overtasked and what not. So it’s relying on certain [??] morality and how you want to do things. Personally, there’s a lot of companies that don’t sort of go the straight and narrow and again, back to my background as a person, the Marine Corp and how I was brought up we never do that. Our grand mantra is do the right thing, whether that’s dealing with customers [??]
Andrew: All right. Let’s continue on with the business story. I just hit the Like button actually we were talking on your Facebook profile. And that’s why there’s a little bit of a hicup when you talk.
So you come up with the projections for income, for expenses. You also want to start thinking about what the brand is going to look like, what the can is going to look like, right ? And we asked you before the interview started if you could bring one of the original cans or one of the early cans.
You have one with you?
Scott: Yes. So can you see it?
Andrew: Yes. I see it now.
Scott: So when we first launched the product and the concept, really the idea was a sparkling botanical beverage and it was very much for that Whole Foods type consumer so you can see a lot of the imagery around showing the actual herbs and the flavor was orange matte which was yerba] matte. And as we operated in the marketplace, to my surprise even within Whole Foods like I would say 5% of the people I was talking to even knew what yerbamatte was, where I thought here’s an ingredient that’s kind of going to explode over time and be as prevalent as green tea.
But it never happened and the idea of the herbs and botanicals people just weren’t getting it. The idea of an herbalist behind it, they didn’t know what that was and quite frankly, a lot of people didn’t even know what a nutritionist did.
Andrew: How did you know that they didn’t know this?
Scott: I actually physically have done probably a thousand in store demonstrations myself and multiplied that times 40 consumers per demo. So personally I have probably talked to 4,000 unbiased opinions and, you know, my training back from Pepsi and other companies, I’ve done a lot of research and things like that so I know how to pick out things without really asking a direct question.
Andrew: How? How do you do that?
Scott: Simply watching facial expressions when you say ‘Do you know what yerba matte is? Because quite frankly a lot of people lie because they don’t want to say I don’t know what it is. Watching facial expressions, watching their reaction when they’re tasting the product, even how hard it is for them to engage in conversation based on the way that the package looks. So quite frankly the new package now is like, I can engage on a conversation like that whereas previous package it was I needed someone who was a little bit more advanced in their knowledge.
Andrew: What do you mean? What would happen when you tried to talk about the package? How would you then try to talk about the package?
Scott: It was sort of like our sales pitch of what is this thing and including the word botanical was a trigger that turned a lot of people off because they went in various directions, either they didn’t know what a botanical was which of kind of scared them. They didn’t want to drink a botanical because they didn’t want to drink a bunch of flowers, which really it doesn’t affect the flavor profile. Or on the flip side they might know about it but they think you’re having a conversation around green tea and it’s really much more advanced than that.
So it’s how approachable you are going to be. You know, like the way you’re dressed right now is very approachable, if you were wearing a pretty suit and what not. It’s like do I want to go out and talk to this person and the previous can was the three piece suit, and our current canvas uses the analogy “keep it simple.”
Andrew: Now there’s less on the bottle. You’re not communicating what’s in it.
Scott: It makes a noise because consumers, myself included, now more so than 10 years ago, are so busy and inundated with information. You know, on a shelf, 10 years ago, you were lucky to get 3 seconds of your attention. Nowadays, I think I’m lucky if I get a second of your attention. I’ll be in a Whole Foods doing a demonstration and a woman would love the product. She’d ask where she can get it. I’d point right behind me in the cooler and say “It’s right there.” She would say “Oh, my god. I’ve walked by here every week for the last 2 years and have never seen it.” But, it’s been there. So, it’s like people get robotic in the grocery store. That’s why you have to shake things up. If you’re so complicated that they don’t want to digest the information, they’ll just move on. It needs to be visually arresting, as well.
We had a lot of people that would say this was a gorgeous package, and we’ve won a lot of awards for it. But, I would say that what it didn’t do in the end was sell enough. That’s the ultimate barometer. When we were there to babysit and explain it, it worked. But, when it was off by itself, it didn’t do what it needed to do. We have enough data to suggest that, as well. We get point-of-sales information from Whole Foods on a daily basis. I could tell you the stores that are doing well and the stores that aren’t. When they were just sitting by itself on a shelf, it wasn’t speaking to people. That’s how we knew that we needed to make a change. If we wanted to go in this direction or come back to it, to let you know about the pivoting of the business, this is somewhere that it came from.
Andrew: I can see that. Now, the word “awaken” is much bigger and clearer, and a bigger part of the label than before.
Scott: Now, “awaken” is orange. It’s not orange matte. The “relax” is berry. It’s not blackberry chamomile.
Andrew: The reason for that is that I always thought that when you were in a store, you were in there to sell. There are new people who are potential customers of yours who have to be introduced. If you introduce and sell it right, they’re going to keep buying, and the store is going to want you in there. You’re nodding, because that is part of the reason you’re there, of course. But, the other thing that I’m learning is that you’re there to test different ways to sell, position, and talk about your product. So, you’ll talk to somebody and say it has yerba mate in it, and you want to see if they’re nodding, or really reacting because they love that.
Andrew: Which, by the way, if you were to do that with me, I love yerba mate. I just got a new shipment. I’m one of the few, apparently.
Scott: Yeah. There are yerba mate brands out there that are ready-to- drink beverages. But, again, they haven’t really expanded outside of the natural channel. As we saw from a revenue perspective, we knew we had to live in more conventional accounts. Again, that was part of the pivot. We brought on a larger investor recently. They needed to know if we could scale. To scale, we’d have to go beyond a Whole Foods, for example.
Andrew: I want to know how you even got into Whole Foods. But, before that, I have to ask you about something you told April. When April pre- interviewed you, you told her that when people don’t buy from you, you feel it’s a personal knock on you.
Scott: When I started the company, I thought it was a knock because the brand was me, and I was the brand. I was so tightly connected to the business. It was just me and another guy. We were bootstrapping. It was painful when somebody would reject the product.
Andrew: Can you give me an example of an especially painful rejection?
Scott: I think I have too many of them to have a specific one. I’ve had people in the past spit it out, right in front of my face, back into the cup, in the store. At the time, did it upset me? Maybe a little bit. But, on the flip side, I’ve always said that if I don’t have people who hate a product, I’m not going to have enough people that love it. The kiss of death in this business, unless you have godly amounts of money, being in the middle and kind of lukewarm, if I just get the reaction from you like “that’s okay,” chances are you’re not coming back. So, I tried to, our product, and we’ve tweaked it since a little bit, is a little bit more polarizing than a normal soda. That was by design.
I expected that going in. I knew people would not like it, reject it. But when you’re fighting every day to keep your start up going, it is kind of a hard thing. It’s like if people came back and said, ‘Well, your interview sucked.’ What are you going to think?
That was a challenge for me. Personally and with my family and with myself, it’s been a roller coaster. There have been definite stressful moments in this. I think that’s what has made me stronger and our company stronger. I always say, ‘I’ve been through the battles.’ There hasn’t really been much I haven’t seen yet. I expect it.
I have a blog that I do. It’s lernerblog.com. The other day I wrote a blog post on it. It was sort of a military analogy of watch your corners, Like when you’re going into a building, into a room, someone’s hiding in the corners most often and you’ve got to watch it. I do do that whenever I’m looking out into the future.
Because I sort of experienced all this stuff, both negative and positive, it’s helped me to run the business even better now. I’m somewhat thankful for the people that spit it out. In-store, the potential investors that laughed at me.
I take it as a personal challenge as well. Because as we do better and ultimately someday when we’re very successful, I think it’s going to be even more enriching of an experience. If everything went great and just took off, I’d probably be onboard with that plan too. But I think the hard work and everything, I think it’s going to pay off.
Andrew: How did you get into Whole Foods? You’re a guy with a brand new company, within months of launching, you’re in one of the biggest retailers in, maybe even the biggest retailer, right, in the health food business.
Andrew: How did you get in?
Scott: Well, I’m not going to lie. I had relationships that I had built up when I was at Pepsi and Naked Juice. So I knew the folks down in Austin. It was funny, my last meeting with Naked Juice was in August of that year. I was walking out.
I had full intention to tell those guys that I was leaving. I want to come back and talk to you. Because I knew without them, none of this was going to happen. Because of the product and the brand we were building.
My boss at the time as we were walking out, she said, ‘Hey, you know, he’s leaving.’ So she kind of stole my thunder. But I said on the way out to the guy I know, ‘I’m going to call you in a couple weeks. I have an interesting idea for you.’
Because truthfully, I had that relationship and I utilized it. Just like I had with other relationships. That’s what really opened the door for me. But again, the proposition, the concept is really what sold itself.
Andrew: How did you know that he was going to be open to that?
Scott: Because I had done my analysis. I knew that this product was a perfect fit within their stores. There was nothing like it. There was a niche there that they were going to be excited about.
Andrew: Did you run it by him in different ways to see if he was interested before you were . . .
Scott: No, not at all. Going back to the P&L discussion, I knew that $1.99 would be very interesting to him. That’s also one of the things he said was, ‘That’s a great price point for this product.’
Andrew: How did you know? How did you know that it would be interesting?
Scott: Because I saw where most of the other products were well above $2.50.
Andrew: Did you see him ever get frustrated with that? And say, ‘Hey, you know what, all these things are above $2.50. If I could just get something under $2.00.’
Scott: I didn’t personally see him frustrated. But I saw a huge gap between like, let’s say a vitamin water and a higher end functional drink. Just with my years of experience, I knew there was a place for it to live at that price point.
From a retailer perspective, you hit that .99 price point, it’s a hot price point. So, being at $1.99 versus $2.39, it’s very advantageous from a consumer perspective. Because I knew i could hit it and hit the margins I wanted, that was another enticing thing.
Truthfully, if it was $3.00, I don’t know if he would’ve taken it. Because he might have not thought it would sell. Going back to the recession as well, I think that’s where it played into. Because if I came back with a $4.00 drink, he probably would have laughed me out of the office. I think that price point really helped get into the stores and get the start. That’s kind of how it went.
Andrew: What if he had said, ‘No’? What was your back up plan?
Scott: Yeah, somebody asked me that the other, and I don’t know. Truth be told, I don’t know if we’d be having this conversation right now.
Andrew: You are just so sure that he was going to say yes, that this fit, because you were living and breathing his business and your business…
Andrew: That’s it. Did you start creating the product before having the conversation with him?
Scott: When I went to him, I had a prototype in hand. It wasn’t final packaging and whatnot, but I had a product in hand.
Andrew: How much money had you invested in the business at that point?
Scott: By the time we had met, about $50,000.
Scott: I’d only raised a small amount of money and then, as soon as he said go, then I kind of went, wheels turning, to get the rest of the money.
Andrew: And then you took that order and you went to investors and said, ”Hey, I have a guy who wants to buy. If you give me money, I can make it.”
Scott: Walking in to an investor, an angel, or whoever it might be, and saying, ”I just landed Whole Foods Nationally,” held a lot of weight, so if I hadn’t gotten that… You go back and, you probably talk to many entrepreneurs and it’s like, what if this happened, or didn’t happen, and yeah, even if this didn’t happen, would I have been able to raise money, and I don’t think I would have because of the cachet of that brand. Truthfully, as an individual, I wasn’t looking to go store by store, walk down the street with the classic grandma that starts the chocolate chip cookie…
Andrew: And I’ve talked to many entrepreneurs who’ve done that, including one, ”Little Ducks Organics”. He went door to door to bodegas in New York.
Scott: Right, and listen, when I started this company, I was 36, I had a little son and a wife, and I guess I just wasn’t in the mindset to go do that. Now, if I was younger, maybe I would have wanted to do that, but if the Whole Foods thing didn’t work out, I don’t know. I just knew it was going to work I guess. Maybe I was just being overconfident, but I knew that what I was going to bring them was going to work.
Andrew: So, I get that, and I get that it did work and he let you in, but the product itself did not work. How did you get them to stick with you as you were basically figuring out what your product was going to be?
Scott: It worked in spots, and that’s kind of what we did. I told this to entrepreneurs all the time, is that national launch was the worst thing we could have ever done, in retrospect, because it totally overextended ourselves in terms of our marketing budgets. We just couldn’t support it, and because of that we had too many locations where we weren’t able to go into and do an in-store demonstration, or have an advertisement, or whatever it might be. So the places, like even specifically in Chicago, where we’re located, the product was doing really well, and that’s where I started to then isolate how we could optimize it to make it easier to sell in those locations where we couldn’t get to, per se. So, if the product…we’d been around for slightly over four plus years, and I can count at least a dozen companies in my category that are gone, that started at the same time as I did, that had raised probably ten times more capital than I did. I mean, I’m talking ten million plus dollars in capital. So, I’ve always said we’re going to be successful because we’re still here. Truth be told, and I tell people this, is that we should probably be dead, we shouldn’t be here, but we’re here because the product and the concept is strong enough that it’s lived on. There are many locations where we’re exceeding the category norms in selling a tremendous amount of product. I mean, we have Whole Foods in the Chicago area where we sell two hundred plus cans a week in there. So, we always had spots that were doing well and that was always my story that I crafted to investors, as I went forward, because it got harder. And I tell entrepreneurs this too. Raise as much money as you can in the beginning, because there are just projections, and it’s sort of a dream and people can jump on board, but the minute you start having true revenue, then they can evaluate you. So, it got tougher over time, as we had those measurements to people who come again[??], so, I had to isolate where we were winning, because, across the board we weren’t winning all over the place, but I had spots.
Andrew: And that was the benefit. Yes, you did overextend yourself and you couldn’t have as many in-store tastings as you would have wanted, but because you were national right from the start, you could look around and say, ”Ah, that spot worked, that one didn’t. What’s better about that one than that one? Well, we did more tastings in that one, or maybe it’s that city is more open to herbal and your [??] discussion.
Scott: Right, right.
Andrew: Is that it?
Scott: Yeah, I would say so. We didn’t have all our eggs in one basket, which helped because I did have spots to choose from, and there was certainly demographic things that led to being successful. But, I mean, we had a pretty good business going in Atlanta Whole Foods, and you’d say, “Oh, Atlanta,” like why would that be?
So there was clear-cut stuff and then there was stuff that’s like, “Hmm, I’m not so sure.” And so that, again, in a way, also reinforced the proposition because I would use that story and I’d say, “Hey, if I can sell 100 cans a week at a store in Atlanta, like no knock on Atlanta, but what could I do in Boulder or LA or New York City where probably there was even more of our consumer?”
So I’ve learned throughout my career, and again, this is the link back to the corporate world of crafting a story and using data to help you with that story, and so I would just pick out nuggets — both good and bad — because when I’m specifically dealing with investors, I’d never want to go in and just sort of paint the pretty picture. And I think that’s why it’s been able to raise money over time because I give the reality of the situation. And so, like, “Yeah, this isn’t working because of this. This is working because of this.”
If we didn’t have Whole Foods either, I wouldn’t have the point of sale data on a daily basis, so I wouldn’t be able to sort of craft an analytical story. So that’s part of it too. Like, if I was just in health food stores and the bodegas, and things like that, I could tell you what my revenue is, but I couldn’t tell you what my velocities are or what the category is doing. So there is lot of element to that.
Andrew: Oh, right, because you get all this data from being in a whole foods?
Scott: Right. So, I mean, I had — for free — data there that has helped me, not only run my business, but also sort of pitch the story from an investment perspective.
Andrew: What was that? Oh, there it is: going virtual. This is one of the things in April’s notes from your conversation with her. How do you run a beverage company virtually? I run Mixergy with a virtual team. I’m the only one in this whole office for Mixergy. But how do you do it?
Scott: When I say virtual, we have folks in our headquarters, but the majority of our assets are out in the field, both from a sales and marketing perspective. So we have folks in Boston or Denver and Minneapolis, or here in Chicago, and I always say, like, “I don’t want you in the office. I want you out engaging with consumers, selling the product.” And so we build a lot of mechanisms to kind of let people do their jobs.
Like, I have an individual in our marketing team that runs our field marketing department, and she has weekly plans that the field teams go out and execute against. So there’s not a lot of guessing, and we’re not sort of leaving it up to them to develop the plan. Like, the plan is developed in headquarters and then executed at the field level.
Andrew: And by field level, you mean the people who I see with the backpacks that have the drinks in them and they hand them out to people.
Andrew: How do you know where to give those out and where people are just going to be…
Scott: Right. So we go… We look at our consumer target, and specifically, right now, we’re looking at folks that are working hard on a daily basis in offices and hospitals, on job sites. And so, like right now, as an example, we’re in the cities a lot, like in Chicago, down in the loop in Boston, we’re all over Boston. So and then…
Andrew: So how do you connect that back with sales?
Scott: So we look at revenue per point of distribution around those areas, if that’s increasing, and also, truthfully, from a social media perspective, Facebook is a good analytical tool to understand if we’re gaining attraction, too, because we’re always trying to drive people back to Facebook and gets likes and thing like that. So we do use a lot of tools within our budget to analyze what’s working and what’s not.
So in that respect, we conduct things virtually, but the other thing that I’ve learned, and actually I had an interview the other day about this, was I personally try to physically meet and engage with my team so that they’re connected to the larger entity. Like, we have a full-time staff out in Boston, and I try to go out there on a monthly basis even just to say “hi” and go out and grab a burger, or whatever it might be, and it means a lot to them.
Because I know a lot of people that work remotely that don’t talk to their boss or don’t know what’s going on, and headquarters is like here and they’re here. And so we try to create a culture that really is inclusive, and that works a lot, but again, if I see people… I don’t want to pay people to sit at a desk and write reports. Like, we’re at a point in our life cycle where we need to be out every day, and that’s what they’re measured on. It’s literally how many cans we’re giving out on a weekly basis. They have objectives to hit and if they don’t do that then we figure out how we can hit those objectives.
Andrew: You were in a Whole Foods once and you saw this woman buying 16 cans of Solixir all at once. Why?
Scott: Why did she buy them?
Andrew: Yes. What was her deal? This is one of the big wins. This is when you knew that you were on the right track.
Scott: I mean, that happened to me multiple times and I guess that’s where really you get a lot of satisfaction. You don’t think about how little you’re getting paid. You’re like wow. It’s still cool to see someone pulling it off the shelves without you asking them to do it. And she was a case where I think she had met me like 3 months prior doing a demonstration at that store and her husband who she said is not a health food shopper, like he doesn’t set foot in a Whole Foods but he loves Solixir and every week he’s like ‘When are you going to buy me Solixir?’. And so there she was buying about 16 cans. It was like rolling down the conveyor belt and I just walked up to her and said ‘Hey. Do you like Solixir?’ and she was like ‘Yes.’ Oh, I started it, blah, blah, blah. She said ‘Oh, I remember you’.
So we’re big on personal connections too and I think that’s what transcends a lot of the noise in the category. A person can have a connection with a company and the brand because they meet one of my people on the street or their engagement on Facebook or online or Twitter or this interview. They can feel that connection. That’s the kind of brand the company and the business were trying to build. We’re not a surface level organization. We want to engage with folks and try to create advocates out there and hopefully that woman is helping us sell the product. Because the reality of it has to come into play.
Andrew: It’s in her house and people see it.
Scott: To make the idea bigger.
Andrew: Feeling a little self conscious because we are a little over time. Do you have another 5 or so minutes? There’s so much that I haven’t hit on yet.
So first of all, I want to relate this conversation back to someone who doesn’t have your connection or doesn’t have a nationwide exposure through Whole Foods. I do know that Whole Foods is very open to local entrepreneurs bringing their products and selling them in the local store. They give you a chance that way and then they let you work up.
If someone gets that opportunity, based on your experience both working at PepsiCo and now working at your own business and in the stores, how did they take that opportunity and expand it and make it into something meaningful?
Scott: Yes. That happens all the time and quite frankly that’s the route I recommend to the majority of people that come to talk to me. It is to literally start in one store and then go to two stores and then three stores. But show wins in those stores that you’re in and the more wins you cobble together and it’s probably the tipping point, my opinion, in a region is five stores. The regional office will take notice of it and then they’ll say ‘Hey, they’re doing really well. Like, let’s put them in the region’. And then they’ll hook you up with the distributor. And then it kind of grows and grows and grows from there. I mean, there’s numerous stories that, that’s usually the way it works in the Whole foods environment. You start store by store and then region by region. We were sort of totally opposite of the ways things usually go and over time it’s usually better to go store by store, region by region.
But because it’s a slower build, you need to be respectful of the longer time it’s going to take and maybe more cash you’re going to need. I don’t know. You know, you’re not going to have as much scale initially.
Andrew: Smaller. Do tastings in a few stores the way that you did, get that feedback, adjust the can.
Scott: Back in the day, if I was single and doing this, I’d be in stores 8 hours a day doing demos and getting out there and that’s literally what you have to do, it’s get the product in people’s mouth. Because you’re probably going to have a Facebook page and a website and Twitter but beyond that most start ups, unless you have an extremely well funded, don’t have a lot of mechanism from the marketing perspective and quite frankly you don’t even need it yet. If you’re only in a couple of stores, you’re not doing an outdoor media campaign and things like that.
Andrew: The most expensive, sorry, I just interrupted you. The audience hates when I do that.
Scott: In the store activity is what needs to be done and attention to detail is crucial because nobody’s going to care about your product or your brand like you are. You might want to think a store is going to care but they’re not going to restock the shelves as fast as you would want them to. If you go in and you buy a 12 cans and it’s gone, are they going to notice and reorder it? That attention to detail. Then making relationships. The great thing about Whole Foods is the personal relationships you can make at a store level and hopefully because you’re local they’ll help you out. It’s different now. Whole Foods is a public company now and it’s growing like crazy and I’d say they still pay homage to the small guys but they have a lot of big guys in there now and they’re spending money. There are a lot of brands in there that Pepsi, Coke, General Mills, Kraft you name it, own that a lot of people don’t even know about. I think people just realized that Coke owns Honest Tea. So there are brands in there that big guys are spending money on. They’re a public company and they need to grow their revenue as well so they’ll help you out but again the onus is on you to be successful. You can’t just say, ‘Whole Foods helped me grow.’ It’s on you.
Andrew: What I was going to ask about the tastings is it seems like that’s the most effective form of marketing. If you get someone to taste it they’re much more likely to try it than if you get them to just watch an ad or click an…
Scott: I think for a food or beverage that is it.
Andrew: It’s extremely expensive though.
Scott: That is but you can also do it yourself. You can enlist your wife, your mom, your friends. When you’re bootstrapping you just find folks to do it. My personal opinion is if the founder, founders, however many there are, are not out there every day doing it themselves then something’s wrong because also it’s an immense amount of research, data that you’re getting. Think of it as three qualitative research sessions every day you’re getting unbiased opinions. You’ve probably heard or used this before but people drink the entrepreneurial Kool-Aid a lot. It’s really hard to evaluate your own proposition but when you walk up to me at a table at a Whole Foods and you spit it out in a cup I got an unbiased reaction there. On the flip side when someone loves it you see that as well. That’s really what’s important. Then shape your idea as you go. That’s the great thing about the store by store model is you can modify things over time and most likely if you’re going store by store you haven’t committed to big manufacturing runs so you can tweak things. I think that’s what’s advantageous about it so by the time you get to that regional level hopefully you’ve figured things out, figured out what the price point is.
Andrew: Two more questions but before I should say to anyone who’s listening that when it comes to tastings I did another interview with a company in the food business. They create a product called Perfect Foods Bar. Do you know these guys? I see them at Whole Foods all the time now. They’re a family that created these bars, they put them in stores, they did tastings as a family just like you and they just kept building up and building up and when I’m at Whole Foods…actually I haven’t been into any in San Francisco yet I don’t think but I was in DC and I kept seeing them. If you’re a Mixergy Premium member go to MixergyPremium dot com and watch their interview too especially if you’ve listened this far in this interview I think you’ll get a lot out of their process. Of course, at MixergyPremium dot com we have over 800 interviews with proven entrepreneurs who teach you how they built their businesses. So if you’re not Premium yet go Premium. The last two questions are calls. You said earlier you totally worked the new guy angle and you worked the phones. Can you give me one example of what you were able to do because you were an entrepreneur who was just willing to put yourself out there on calls?
Scott: I would go back to the supplier that makes our products. It wasn’t an easy task to get them to take us on because they’re supplying larger companies and they didn’t have to do a favor for me. It wasn’t begging but I took two positions of, show them I know my stuff, I know what I’m doing so I’m not going to waste their time. On the flip side, show them the reality of who I am and not try to pretend I’m someone who I’m not because I felt like at some point they’d have that emotional connection like, ‘This guy is working hard and he’s doing it himself.’ That had happened with multiple suppliers even beyond who juices our product, where we procure our fruit juice. That’s really where I played it. Financially on the poor card it’s more like the folks that helped us design the package and things like that. Truthfully the project would have cost us probably $200,000 at Pepsi and maybe they did it for a quarter of that for me. Because they like me and I had the relationship and I asked too. I just said, “Honestly, here’s my budget. I’m not going to waste your time. If you are willing to work with me, this is what I can pay. But I can’t pay this.” So I think they appreciated the honesty and they somewhat like living vicariously as well. Even the packaging design I did in our first package they’re not with us anymore. They gravitated to someone that have done the new package. But I still know that those guys take a lot of pride in where they got the company. So there’s that element of entrepreneurially living vicariously through the start up.
Andrew: And final question is revenues. What can we tell the audience about how far you guys have come?
Scott: We’re around a million dollar plan right now. That’s where we’re at. We’re still in the beginning stages of getting this thing going. And it’s also a factor of where we’ve pivoted over the last six months. Last the six months we’ve brought in a pretty sizeable investor. That allowed me to hire a team and do the marketing and do the things that we needed to do. And our projections are much greater than that going forward. But we’ve really started to establish ourselves again outside of the natural channels. So in Chicago and Boston as an example you’ll find us pretty much everywhere to include the Bodega and the 7-Eleven and the Walgreens and the restaurant around the street of …
Andrew: What did you have to change to be a product that someone at the 7-Eleven and Bodega would want?
Scott: I was going back to the keep it simple stupid idea of the flavor names going at being real simple and the packaging going to being really simple. Chris [??] the no sugar added being called out on the package. We reference botanicals on the side panel, but you won’t see any reference to it on the front. So for those that want to dig a little deeper, they’ll see it there. And for those that just want to know what the heck this is we make it very, very simple for them. So that simplicity as well as we improve the flavor profiles as well. We made them a little less herbal and what not which has helped a little bit. But I always use this analogy, is about a year ago when we started going into more of these mainstream accounts, and this is still with our old package, was one of my sales guys was walking in Chicago out. And he saw this guy walk out of a 7- Eleven with a cigarette in his mouth and two cans of Awaken in his hand. And he just had to stop him because he’s like, “Wow. That’s not our target consumer.” No offense to that guy, but that wasn’t who we were about. And he went up to him and said, “Hey, what do you know about this product?” And he’s like, “Oh, I love it. It’s great.” When he told me that I knew that we had something there that could expand because that person just wasn’t who were talking to in a whole foods environment. So the simplicity injected into the new proposition has helped us immensely. Even the new website, if you go solixir.com, it’s vastly different than it was before. The previous website was very detailed about. It was about the herbs and the natural stuff. And there’s still sprinkles of that in there now. But now it’s tell me what it is. And it’s got a good vibe. And the brand changed too. The personality changed. It’s a little bit more light-hearted than serious in the past. So it’s really been fun to go through this journey of seeing things change over time. And the feedback we are getting from retailers, consumers, investors was really positive. And so we know we made the right change. And we’re seeing that in the data that we’re getting as well. We’re not seeing a regression. We’re seeing it increase from a revenue perspective, which is a good thing.
Andrew: All right. Well I’m going to end this by thanking two people. First Ken Wallace, who saw you speak at an event in Chicago, and said, “Andrew, I’m in the sass business. I do software and I can’t believe I’m asking you to bring someone on whose outside software. It’s so far outside using the beverage industry. But I heard this guy at a conference. You’ve got to bring him on.” And so thank you Ken for making the suggestion.
Scott: I would say thank you as well.
Andrew: And anyone else by the way if you have a suggestion for an interview lead there’s a link on the site where you can do what Ken did, which is just tell us about them so we can invite the guest on to do an interview. And to you, of course, Scott thank you so much for doing this interview.
Scott: Thank you. I really enjoyed it. And I appreciate the time.
Andrew: You bet. I hope you guys will all do what I just did. Find away to say thank you to Scott and hopefully from there good things will happen. Thank you all for being a part of this interview. Bye.
Scott: Thank you so much. Have a good night.